No. of Recommendations: 6
Thanks for the info and Excel SS.

As to CAREs Act provisions for corporate funding and SBA loans through the Payback Protection Program, here is a summary...

The program has been designed to make funds available to qualifying businesses quickly through approved banks and nonbank lenders, such as credit unions.

•Under the Act, qualifying businesses include:
....- Businesses with up to 500 employees or which meet the applicable size standard for the industry as provided by SBA's existing regulations.
....- Businesses in the accommodation and food services industries with more than one physical location but no more than 500 employees at each location.
....- Nonprofit organizations.
....- Eligible independent contractors and sole proprietors with supporting 1099 or payroll tax filing information.

•Loans will be available through SBA and Treasury approved banks, credit unions, and some nonbank lenders

....- The time period for the "covered loan" is the period from February 15, 2020, ending June 30, 2020. The loan must be applied for prior to June 30, 2020.

•Borrowers can borrower 2.5 times their monthly payroll expenses, up to $10 million with an interest rate not to exceed 4%, deferred payments and a maximum maturity of 10 years.

•Applicable uses for the loan proceeds include: (1) qualified payroll costs; (2) rent
(emphasis mine); (3) utilities; and (4) interest on mortgage and other debt obligations. However, employees earning in excess of $100,000.00 are excluded.

•Loan forgiveness is available for funds used to pay 8 weeks of payroll and other qualifiedexpenses. The amount of the forgiveness of the loan will be excluded from gross income to the employer.

•Loan forgiveness may be reduced by the number of full-time employees who are laid off during the "covered period," as compared to the number of full-time employees employed from January 1, 2020 to February 29, 2020. The amount of forgiveness may also be reduced by the amount of reductions in total salary or wages of the employees during the covered period as compared to the most recent full quarter during which the employee was employed prior to the covered period.

•Businesses receiving loans must use the money within two months to obtain forgiveness. Notably, the employer cannot pay any employee more than $10,000 in those two months, or the portion of the forgiven amount may be reduced.

•An employer may also receive forgiveness for additional wages paid to tipped employees during the covered period.

•If a company laid off and shut down its operations due to the crisis, it may still be eligible for the SBA loans on the terms above, though not forgiveness of a loan since employees were not retained.

These provisions are going to be the most important for hospitality and retail REITs who own restaurants, movie theaters, entertainment properties and other businesses that saw their revenues drop to zero due to social distancing.

But to the REIT itself, if it is experiencing loss of revenue from loss of rents, providing the provisions above are met, the REIT should be eligible for PPP loan assistance, if I'm reading the rules correctly. If so, two other important provisions of this Act is companies who receive the low cost/forgivable loans cannot pay a dividend nor buy back company stock up to the year following the payback/forgiveness of the SBA loan. I don't know what effect this will have on a REIT who is required to distribute not less than 90% of REIT taxable income to maintain REIT status.

There are also provisions in the ACT for healthcare relief.

The Act increases funding for the Public Health and Social Services Emergency Fund, by attributing:

•$75 billion in grants and other mechanisms to reimburse eligible health care providers for health care-related expenses or lost revenues not otherwise reimbursed that are directly attributable to COVID-19. Eligible providers are defined as public entities, Medicare- or Medicaid-enrolled suppliers and providers, and other for-profit and non-profit entities as specified by the Health and Human Services (HHS) Secretary

This may provide relief to HC REITs whose operators are likely being hit with very large added expenses

And this from NAREIT's site

[This year] began where REITs had the highest capital and lowest leverage that they’ve had in 20 to 25 years. They’ve lengthened the maturities on their debt, so they don’t have a whole lot of near-term obligations. They have a lot of liquidity resources; they have cash and securities but more importantly, they have lines of credit that are enough to handle a whole year, or even several years, worth of interest payments. Most REITs are pretty well covered for handling the immediate crisis. And their operating [statistics] were good; they’ve started the year with occupancy rates at or near record highs. Their tenants are going to come under stress, but they’re coming under stress from a position of good strength — but we’re going to see how that is tested — but they’ve had record earnings, so this is a much better position to face a crisis than if they had had mediocre earnings and a lot of vacancies. They’re well braced for this.

This assessment is broad and I'm sure it will vary widely by the REIT sector and individual REIT.

I would bee watching for info releases from REITs as they digest their tenents ability to pay rent, their own liquidity and the effects of the CARES Act on their operations.

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